The net dollar amount of new accounts contracted.

In the world of business, particularly for subscription-based models (SaaS), Bookings refer to the total anticipated recurring revenue a company expects to generate from signed customer contracts during a specific period. Here’s a breakdown of the key characteristics of Bookings:

Core Concept:

  • Bookings represent the contracted value, not necessarily the cash collected upfront. Think of it as the total income the company expects to earn from a customer based on the terms of their agreement.

Components of Bookings:

  • Contractual Agreements: Bookings are based on signed contracts with customers, indicating a confirmed commitment. Verbal agreements or potential deals wouldn’t be counted.
  • Recurring Revenue: Since Bookings focus on subscriptions or recurring services, the value is typically expressed as the annualized value of the contract. For instance, a monthly subscription of $20 would contribute $240 (annualized value) to Bookings.

Importance of Bookings:

  • Predicting Future Revenue: Bookings provide an estimate of future recurring revenue from new and existing customers, which is crucial for financial planning and forecasting.
  • Sales Performance Measurement: Tracking Bookings helps assess the effectiveness of sales efforts in acquiring new customers and upselling existing ones.
  • Growth Analysis: Analyzing trends in Bookings allows companies to measure their overall customer acquisition and revenue growth over time.
  • Investor Relations: For subscription-based businesses, Bookings are a key metric for investors to understand the company’s growth potential and future revenue streams.

Differentiating Bookings from Other Metrics:

  • Revenue: Revenue reflects the actual cash received from customers for services rendered, whereas Bookings represent the contracted value, which might be collected in installments or over time.
  • Customer Acquisition Cost (CAC): CAC focuses on the cost associated with acquiring a new customer, while Bookings represent the value generated from the new customer.

Additional Considerations:

  • Bookings can be further segmented to provide more granular insights. For example, companies might track Bookings for new accounts contracted, upsells from existing customers, or by specific product tiers.
  • Some businesses might use the term “Billings” interchangeably with Bookings. However, a subtle difference exists. Billings typically refer to the amount invoiced to customers during a specific period, whereas Bookings represent the total contracted value regardless of the billing schedule.